Insolvency rates almost back to pre-recession levels

UK seeing huge fall in numbers of medium-sized enterprises going out of business

The expression ‘it never rains but it pours’ could do with a positive counterpart. After substantial doom and gloom in business headlines at the beginning of the year, the last month has seen a succession of good news for UK plc pleasantly accompanied by some idiom-busting balmy weather. Following hot on the heels of confirmation that we’ve officially escaped from the clutches of a triple-dip recession comes some equally cheering news. According to the latest Business Insolvency Index from global information services company Experian, insolvencies amongst medium-sized enterprises this March were down. Way down.

Businesses that employ 25 - 50 people have seen their rate of insolvency drop sharply from 0.24% in March 2012 to just 0.17% in the same period this year. Seeing the number of insolvencies drop by almost a third may be positive news enough. But when you consider the fact this means insolvencies for medium-sized enterprises have returned to the near pre-recession level of 0.16% seen in March 2007, the magnitude of this information begins to sink in.

Looking at the wider business landscape also yields a rather sumptuous vista. Not only have insolvencies overall dropped by almost 400 from 2,112 in March 2012 to 1,736 during the same month in 2013 – a fall from 0.11% of the business population to just 0.08% – but this rate also seems to be stabilising. This is the second month running the Business Insolvency Index has reported an overall rate of 0.08% and it seems some of the pressure facing businesses is at last starting to dissipate.

However, that’s not to undermine the significant efforts of the business community as a whole. As Max Firth, managing director, Experian Business Information Services, UK&I said:

“The fact that mid-tier businesses are seeing lower rates of insolvency is encouraging. These companies have struggled more than most during the recession as they are not necessarily small enough to be flexible, but are also not big enough to benefit from economies of scale.

“Today’s figures point to a more benign trading environment and suggest that companies are becoming much better at anticipating risk, getting their credit policies in shape and developing better relationships with customers.”

All told, this research is showing an economy regaining some of its lost confidence and stepping out once more into the bright light of day.

About the Author

As editor, Russell is the man in charge of properly apostrophising our publication and ensuring Oxford commas are mercilessly excised. Our digital doyen, he’s also a Photoshop Pro, a dab hand with InDesign and the man to go to if you need a four-hour soliloquy about the UK's best silicon startups.